Immigrants are increasingly getting the message: “Welcome to America. Now buy a house.”
An immigrant with a scant credit history? Solvable. A family who wants to pool money to make a down payment? That’s just fine. A borrower who is in the United States illegally? Not an insurmountable problem.
For years, mortgage lenders have had programs for minorities, especially blacks, that involve relaxed credit standards and neighborhood outreach. Now those efforts are being tweaked and expanded for immigrants. There’s a good reason for that: More than one in three new households are headed by immigrants, according to the Harvard Joint Center for Housing Studies. More than 1.2 million immigrants have arrived every year since 2000. Immigrants are where the housing growth is.
Last year, Countrywide introduced its Optimum Loan program, under which borrower education is just one facet. Optimum combines disparate features of many loan products into one:
allowing low or no down payment;
supplementing the credit record with “nontraditional” credit;
recognizing cash income, and rent from housemates;
permitting the pooling of money for down payment and closing costs.
Mortgages with low or no down payments are relatively common nowadays. Optimum’s three other features are relatively unusual. Take the nontraditional credit records. A lot of immigrants don’t have extensive credit histories in the United States, both because they don’t have many car loans and credit cards, and because they just haven’t been in the country long enough to establish a track record.
Most mortgages are for people who can document that they are in this country legally. A few lenders are experimenting with providing home loans to people who have no such documentation. They are called ITIN loans because borrowers use individual taxpayer identification numbers (ITINs). These numbers are provided by the Internal Revenue Service to people who aren’t eligible for Social Security numbers, but who pay federal income taxes.
Colonial is still developing the loan program, which allows the use of nontraditional credit and recognizes cash income. The mortgages are risky because the borrowers are subject to deportation and the loans can’t be sold in the secondary market. So they have higher interest rates—anywhere from half a percentage point to 4 percentage points higher than for a standard, fully documented fixed-rate mortgage. The loans require substantial down payments. “That’s kind of our hedge against that deportation risk,” Motley says.